What is the short-run profit maximizing level of output for a firm with short-run total cost given by TC = 50 + 2q + 2q^2 that operates in a perfectly competitive industry where the short-run market demand and supply curves are given by QD = 1410 – 40P and QS = -390 + 20P?
Answer
a.
1800
b.
1130
c.
7
d.
30
1
Expert's answer
2013-07-31T09:42:55-0400
TC = 50 + 2q + 2q^2 QD = 1410 – 40P QS = -390 + 20P Answer: Qd = Qs, so 1410 - 40P = -390 + 20P 60P = 1800 P = 30, Q = 1410 - 40*30 = 210 For profit maximization MR = MC = P = 30 MC = TC' = 4Q + 2 = 30 4Q = 28 Q = 7 So, the short-run profit maximizing level of output for a firm is 7 units. Right answer: c. 7
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